SAN FRANCISCO (Reuters)
— Alibaba Group Holding Ltd may be making its debut on Wall
Street later this summer, but it's certainly no stranger to the
investors of Silicon Valley.

In the past 18 months, the Chinese e-commerce giant has burrowed its
way into the Valley's exclusive investment circles, snapping up
sizeable stakes and board seats in fast-growing startups that could
provide strategic advantages for when, not if, the company
challenges Amazon.com Inc or eBay Inc on their home turf.

A U.S. investment team headed by cable magnate John Malone's former
dealmaker, Michael Zeisser, targets stakes in e-commerce, mobile and
logistics-focused companies which combine online and offline
operations, people familiar with the U.S. operations said.

Alibaba's vision for the world's largest consumer market has been
the subject of intense industry speculation. Silicon Valley insiders
who have held discussions with the company, which handles more
online transactions than Amazon and eBay combined, say its U.S.
deals are central to its strategy of becoming the world's dominant
e-tailer.

The growing pool of investments give Alibaba a glimpse into a swathe
of Silicon Valley's cutting-edge technologies; they yield insights
into an unfamiliar market; and they help build a web of alliances
and connections, industry insiders say.

"They want the optionality to see if a technology or trend takes off
in the U.S., or to see if it's applicable to bring back home," said
Hany Nada, a founding partner of GGV Capital, a venture capital firm
that invested in Alibaba in 2003.

Alibaba investments may also help in its inevitable landing on U.S.
soil, whenever that may be, he said: "They want them to soften the
beach."

For instance, Alibaba made a $202 million investment for a 39
percent stake in 2-day shipping service Shoprunner, in October. The
membership-based shipping plan is a rival to Amazon Prime that works
with dozens of U.S. retailers. Alibaba's intention was to learn
about U.S. online shopping, the country's distribution
infrastructure, and potentially build relationships with retailers
without exposing itself directly to the famously ruthless Seattle
giant, a Shoprunner executive said.

"They're certainly not going to be invited to play in Amazon or
eBay's sandbox," she said. "But in an indirect way they can learn
and observe from hundreds of large retailers."

Alibaba's shopping spree has picked up pace in the past year, and
broadened into other areas such as mobile. Its investments have
included luxury e-commerce site 1stDibs; a 20 percent stake in
mobile messaging app Tango, for which it has paid $217 million; and
ridesharing firm Lyft.

By acquiring minority stakes, Alibaba's playbook has differed from
what's typical of large tech firms like Google or Facebook, which
prefer to buy startups outright.

"They want to have an early look at what's happening in innovation,"
said one VC investor in Lyft. "I don't think these investments move
the needle for them financially."

Mitch Lasky, a partner at Benchmark Capital who has co-invested with
Chinese giant Tencent Holdings and has held conversations with
Alibaba, noted that Chinese companies often take 10 to 30 percent
stakes in other firms, even marginally competitive ones, to build a
"network of alliances."

It's "unusual for us but it's not unusual for them...to create a
network of strategic bonds," Lasky said.

Then there's also a political element: Chinese companies tend to be
sensitive to the potential for a public or regulatory backlash that
could complicate cross-border acquisitions.

"They are concerned about the optics of Chinese companies of buying
American companies outright," Lasky said. "There's a political cost,
even if it's unspoken."

'LIQUID CURRENCY'

Alibaba has closely guarded its ambitions for the United States and
executives have privately played down suggestions it would take
Amazon head-on. But there's little question that investments in the
United States are a high priority, people familiar with the company
say.

In late 2012, executive vice-chairman and IPO architect Joe Tsai
flew to California to discuss an investment in Quixey, a startup
that makes a search engine for mobile apps, said Quixey founder
Tomer Kagan. Kagan accepted funding within 30 days of first meeting
Alibaba representatives.

In March, Tsai told Reuters the IPO gives Alibaba the financial
muscle to fund more acquisitions with stock.

"Having a liquid currency is very, very helpful," Tsai said in an
interview. "We'll be sticking very close to our knitting, staying
very true to our core business, e-commerce."

Tsai's eyes and ears in California are Zeisser, who heads Alibaba's
U.S. investments group, and Peter Stern, a former Credit Suisse
banker. The U.S. investment team, formed in October, initially
worked out of Alibaba's Santa Clara office but is planning to open
an office in downtown San Francisco.

Alibaba's investments have so far emerged from a tight network of
influential contacts. Jerry Yang, the Yahoo co-founder who
negotiated Yahoo's investment in Alibaba in 2005, introduced Tango
to Alibaba executives last year, a source close to Tango said.

Fanatics and Shoprunner are both partially owned by billionaire
businessman Michael Rubin, who has long known Masayoshi Son, the
Softbank founder who owns a slice of Alibaba. Alibaba was introduced
to Quixey through GGV Capital, a venture capital firm with a
longstanding Chinese practice that invested in Alibaba in 2003,
Kagan said.

Quixey's Kagan believed Alibaba would give him the latitude to grow
independently for years. But he pointed to UCWeb, a Chinese mobile
search company in which Alibaba invested in 2009. That seemed a
passive investment until last week, when the two parties unveiled a
joint venture to challenge Baidu in China's $2.5 billion mobile
search market.